CBT manufactures and sells specialized baseball bats for $160 each. The breakdown of CBT's costs are:...

 

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CBT manufactures and sells specialized baseball bats for $160 each. The breakdown of CBT's costs are: direct material $40; direct labour $24; variable manufacturing overhead $16; fixed manufacturing overhead $580,000; variable SG&A $5; fixed SG&A $290,000. During the year, CBT produced 60,000 units and sold 50,000 units. CBT has not decided which method should be used to value is inventory and COGS. Required worth 5 marks: a) Complete CBT's Income Statement using the Contribution Margin Method (variable costing). b) Complete CBT's Income Statement using the Gross Margin Method (absorption costing). c) If there is a difference in Operational Income (Profit), and comment on what is causing the difference between the two methods, and if it is permanent. d) Which costing method do you suggest. Give at least one legitimate reason for your selection. CBT manufactures and sells specialized baseball bats for $160 each. The breakdown of CBT's costs are: direct material $40; direct labour $24; variable manufacturing overhead $16; fixed manufacturing overhead $580,000; variable SG&A $5; fixed SG&A $290,000. During the year, CBT produced 60,000 units and sold 50,000 units. CBT has not decided which method should be used to value is inventory and COGS. Required worth 5 marks: a) Complete CBT's Income Statement using the Contribution Margin Method (variable costing). b) Complete CBT's Income Statement using the Gross Margin Method (absorption costing). c) If there is a difference in Operational Income (Profit), and comment on what is causing the difference between the two methods, and if it is permanent. d) Which costing method do you suggest. Give at least one legitimate reason for your selection.

Answer rating: 100% (QA)

To complete CBTs Income Statements using both the Contribution Margin Method variable costing and the Gross Margin Method absorption costing we need t... View the full answer